Perseus to Buy Avalon; Eyes PGW Pubs

by Jim Milliot, PW Daily -- Publishers Weekly, 1/11/2007

Events surrounding AMS's bankruptcy continue to develop rapidly; Perseus Books Group announced last night that it had signed a letter of intent to acquire the Avalon Publishing Group, the largest client of AMS subsidiary PGW. In addition, Perseus CEO David Steinberger said he was developing a plan with Avalon president Charlie Winton—who also founded PGW—to assume distribution for some or all of PGW's clients. "We're trying to come up with a solution that will satisfy everyone's interest," Steinberger said about the PGW proposal. "Our goal is to move quickly, since circumstances require it," he added. Steinberger had no comment on reports that Perseus is planning to offer to pay publishers up to 75 cents for every dollar owed PGW clients on the AMS bankruptcy in exchange for a multi-year contract. "We are looking for creative solutions," he said.

The biggest stumbling block Perseus could face is the status of the PGW contracts. Although most distribution contracts provide an out for publishers if the distributor fails to make necessary payments, in the case of bankruptcy, those contracts are considered assets and any change in them would require court approval. Although the details of the Perseus offer are vague, the pending deal appears to be being made directly with the PGW clients and is not an offer to acquire PGW. If the court allowed the publishers to accept the Perseus offer, the value of PGW to AMS's creditors would plummet. The judge may find that acceptable, since it would provide immediate help to the publishers, while lowering a liability, although, without a sale, it would give less money for the creditors to divide up.

As for the Avalon deal, Steinberger said he had been talking to Winton about a possible purchase for some time and that the AMS bankruptcy accelerated the negotiations. "We needed clarity on Avalon before we could push forward with a deal for PGW," he said. Following completion of the purchase, which Steinberger said will happen as soon as possible, Winton will continue to head Avalon for a transition period before moving to a consultancy role that will focus largely on distribution issues. In the short term, no changes are planned for Avalon, and Steinberger said Avalon will keep an office in California "forever." As part of the purchase, Perseus plans to assume distribution for Avalon titles.

If Perseus is able to add PGW to its roster, the company will increase its lead as the country's largest distributor of independent publishers, following earlier acquisitions of CDS and Consortium. The company is just beginning to integrate the Consortium inventory into its Tennessee facility.